Auction winners who don’t pay up are a growing trend

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Sept. 5, 2002 — It’s the quiet fear behind anyone who’s ever sold anything on an auction Web site. What if the winning bidder doesn’t pay? Sellers offering up pricey Cisco Systems hardware on eBay recently know what that feels like. Well over $1 million in Cisco auctions have been ruined by bidders who simply disappear after the auction has ended. Some say it’s an elaborate fraud orchestrated by “the Cisco Raider.” Others think it’s just vandalism. But perhaps of greater concern, some eBay sellers are getting the feeling that the problem of disappearing auction winners is getting worse.

They're called “deadbit bidders.” They ready a bid that’s sure to win an auction, far above market value, and when the auction’s over, they just disappear. After three such incidents, eBay generally suspends the user. But that’s no deterrent. Determined deadbeats just re-register under a new name and start all over.

It’s more than just an aggravation for the eBay seller, who now has to start the selling process over again. eBay doesn’t refund the listing fee — $3.30 for items over $200 — so that’s lost. Any other marketing fees, such as placement on eBay’s front page, are also lost. The seller must fill out two separate forms and wait about a month to issue a complaint and ensure that eBay doesn’t deduct its selling fee.

And the consequences are even worse than that, according to one repeat victim of deadbeats who asked not to be identified. The loss of time can cut deeply into sale prices.

“One item I had to list three times,” he said, because the first two auctions for the Cisco router he was selling were ruined by deadbeats. On the third try, he sold it using eBay’s “Buy it Now” feature “just to get rid of it” at $650. It likely would have sold for $800 at the initial listing, but in the interim four weeks, routers from failed dot-coms flooded the market.

It’s difficult to say just how widespread the problem is, but three avid eBay sellers told MSNBC.com their deadbeat rates can vary between 5 percent and 15 percent. eBay power seller Geoff Giglio, who auctions 300 to 500 items each month, said he sees 20 to 40 deadbeats monthly.

For some reason, deadbeat bidder rates among Cisco routers has been extraordinarily high of late. A source who requested anonymity provided MSNBC.com with evidence of hundreds of auctions that had been ruined by deadbeat bidders during the past 9 months. In a single day, deadbeats ruined over $40,000 in sales, the source claimed. Donlay confirmed eBay is investigating the situation, but declined to say more.

Cisco equipment auctions that were allegedly ruined by 16 eBay bidders foiled hundreds of thousands in sales during recent months. User feedback on the bidders is riddled with complaints.

“You are quite correct, someone decided they wanted to be the high bidder on three pieces of Cisco equipment I was selling and then after the auction never responded to emails in any way or made any effort to pay for the auctions,” said one victim. “So the equipment is still sitting here, I haven’t had a chance to re-list it.”

Sellers from these auctions who were contacted by MSNBC.com revealed the same pattern. Many think a single person is behind all those IDs, a character they call “the Cisco Raider.”

But eBay power seller Giglio, who says that he himself is a victim of the “Cisco Raider,” thinks the ruined auctions are really just the work of pranksters.

“I think the majority are kids screwing around, people who have nothing better to do,” said Giglio, the CEO of Worldwide Technology Asset Recovery Exchange. He estimated that the non-payments cost him $600-to-$700 in listing and marketing fees. “They tend to go for high dollar items... It’s someone who says, ‘I’m just going to mess around, oh, here’s an expensive thing.’ ”

But the source who compiled extensive research on deadbeat Cisco auctions believes something much more serious is happening. He believes the “Cisco Raider” is purposefully ruining auctions by the competition to force bidders towards his own auctions, driving up prices and raising profits.

“He’s selling the items at the higher price. Say your system broke down today. You have to buy from him now,” the source said.

Rosalinda Baldwin, who operates an auction watchdog service called The Auction Guild, thinks the regularity of deadbeat bidding on certain Cisco equipment lends credence to the idea that it’s more than random vandalism. But whether the Cisco Raider is a fraud artist or a collection or pranksters, the number of deadbeat bidders is clearly disturbing to auction sellers. Baldwin thinks deadbeat rates reach 20 percent in some categories, “and eBay is doing nothing about it.”

“They keep telling us, ‘We want to make it as easy as possible for bidders,’ Well, when are bidders going to be held liable for what they bid on?” Baldwin said.

Baldwin is among those who think eBay should have some way of charging bidders if auctions go badly, by tying bidder accounts to credit cards or checking accounts that can be automatically deducted.

But free bidding has been a hallmark of eBay since it opened, so the site would likely be reluctant to do anything that might hamper bidders, Baldwin said. In addition, since eBay collects listing fees on deadbeat auctions, the firm has little incentive to act, she said.

“That’s not true,” Donlay said. “We have a huge incentive to fix it, because if (users) are unhappy, and if they decide to sell less we’re definitely affected.”